Today's Statesman has more on the SDS charter amendment's potential impact on Mueller. The charges, counter-charges, and rebuttal arguments are bewildering.
No wonder: The SDS charter amendment is a complicated piece of legislation. Municipal finance and economic development law -- the backdrop for the charter amendment -- is extremely technical, the domain of highly specialized lawyers. The Mueller agreement (including exhibits) is over 1,000 pages, and spells out, in detail, complicated financing mechanisms for a period stretching over 15-20 years. No stranger to the Mueller MDA (myself included) could possibly evaluate all of the competing claims. I doubt the experts who drafted the Mueller MDA understand exactly how the charter amendment will impact Mueller. It will likely take years of litigation before anyone knows. (Since any citizen has standing to enforce the charter amendment, I'm confident that some malcontent will sue.)
Some of the claims outlined in the Statesman article, however, don't make much sense, even to this non-expert:
Rodgers, a real estate investor who started the Stop Domain group, said he took pains to exempt Mueller when he wrote the referendum.
"The city is using Mueller as a distraction," he said, and "ignoring that our economy is in free fall and that they shouldn't be giving taxpayer money to a luxury mall."
Although Rogers says Mueller will be "exempted" from the charter amendment, he seems to acknowledge a few paragraphs later that the amendment will force the city to find an alternative source of funds to pay off the Mueller bonds:
The city took out $12 million in bonds to help pay the $158.4 million cost of infrastructure at Mueller, such as streets, waterlines and sidewalks. It is paying off those bonds with sales taxes from stores at Mueller.
The bond money would be considered an incentive under Proposition 2, because infrastructure built with it benefits the retail stores at Mueller, said Jim Cousar, a lawyer representing the city.
Similarly, sales-tax rebates benefit the Domain, he said.
Rodgers said the city could find other money sources to pay off the bonds, such as the tax rebates it would no longer have to pay the Domain if Proposition 2 passes.
Bondholders would accept another form of payment, said University of Texas accounting professor Michael Granof.
"The city will find a way to pay it off, because it would kill their credit rating if they default," he said.
But former Council Member Betty Dunkerley, who opposes Proposition 2, notes that the city doesn't have an extra $12 million lying around as the economy slows.
Does the charter amendment exempt Mueller or doesn't it? Forcing the city to find alternate funding sources doesn't sound like much of an exemption to me.
Next we hear that the Mueller agreemeent could be tweaked to comply with the charter amendment:
City officials have had several months to amend the Mueller deal and allay their fears that Proposition 2 will ensnare Mueller, Rodgers said. Only a few wording tweaks would be needed, he said.
Cousar disagrees.
"It's a large and complicated agreement with many moving parts," he said. "If you start changing the obligation of the city and rewriting it, other things are likely to be affected."
The City Council recently hired the law firm Vinson & Elkins for $75,000 to ask a judge whether the city can keep paying off the $12 million bonds with sales taxes if Proposition 2 passes.
I've been trying to figure out what "tweaking" would preserve the Mueller MDA. The charter amendment applies to pending agreements which make the payment of financial incentives "contingent on or subject to the city's appropriation of funds for the payment of the Financial Incentive." The Mueller agreement contains this language in several places, so the charter amendment would clearly apply to it. Perhaps Rogers means the agreement could be modified to remove this language, but that won't happen before election day. And it's unclear, to me at least, that the agreement could be saved by deleting this language after the charter amendment takes effect. Perhaps Rogers means that the Mueller incentives can be rolled into a Tax Increment Financing District; that would seem to require more than a few tweaks, though.
The city is also paying for park and pond upkeep at Mueller and for off-site utility projects, such as new water and sewer lines that will serve Mueller and nearby areas. As it sells off parcels of the airport land to Catellus to develop, the city is reinvesting that money in infrastructure at Mueller. Those strategies would be all be banned under Proposition 2, Cousar said.
Rodgers said the claim that pond or park money would be affected by a referendum targeting a retail project is absurd. And he notes that Proposition 2 exempts agreements in which the city shares the cost of infrastructure with a developer.
But Cousar said Mueller wouldn't be exempt, because the city is contributing more money than a typical cost-sharing agreement to get the kind of project it wants.
If Proposition 2 passes, "key financial underpinnings would be affected. It won't be a simple fix," said Matt Whelan, a senior vice president at Catellus. "The agreement we have right now is producing results. We just want to keep doing what we're doing."
There is nothing absurd about arguing that the charter amendment will apply to the park and pond upkeep. The charter amendment bars financial incentives "in connection with the development or re-development of any real property that includes one or more Retail Uses." The charter amendment, in other words, doesn't just bar incentives for retail uses, it bars incentives for any development that includes a retail use, even if the incentive is unrelated to the retail use. (I've argued the charter amendment is overly broad for just this reason.)
The charter amendment does include an exception for infrastructure improvements. That exception permits
cost participation by the city in constructing street or utility improvements (as, for example, over sizing of utility improvements to accommodate future development) consistent with generally applicable city policies and practices, provided that the developer's or owner's share of such costs fairly and reasonably approximates the cost of construction of such improvements suitable to serve the improvements and uses intended by the developer or owner of a Retail Use benefited thereby.
Clear as mud, right? Who knows.
I'm sure the charter amendment raises dozens of issues for Mueller, and I'm sure Catellus and the City will develop strategies for preserving the Mueller agreement if the charter amendment passes. I doubt that even the City and Catellus, however, know for sure which strategies will work and which won't, and won't know until they've been sorted out in court. A non-expert like me certainly has no chance of sorting it all out.
The main conclusion I draw from all this: If you hear some layman claiming that the charter amendment won't affect Mueller, rest assured he doesn't really know.
